86% of SMEs in England are planning to invest

25 February, 2014

A new survey has revealed that 86% of small-to-medium sized manufacturers in England are planning to invest in capital equipment over the coming 12 months, and are planning to spend an average of £121,000. The survey of 864 SMEs ­– the largest number to take part in the Manufacturing Advisory Service (MAS) Barometer survey since its launch in 2012 – confirms the findings of a recent CBI survey.

There are more than 80,000 SME manufacturers with 2–249 employees in England, so the findings could equate to hundreds of millions of pounds of new investment in equipment over the coming year.

Two-thirds of the firms questioned say they are looking to buy new plant and machinery, just over half are planning to upgrade their IT/communications infrastructure, and nearly a third intend to improve their premises. The main reasons they give for these investment plans are: to boost efficiency and quality (31%); to develop new products and processes (30%); and to extend their existing capacity (22%).

Fewer than one in five companies (19%) are planning to approach banks to fund their equipment purchases, with most manufacturers choosing to secure money via grants (27%) and the Regional Growth Fund (21%).

Close to two-thirds (62%) of the companies surveyed report an increase in sales over the past six months (a 6% rise on the previous quarterly survey), while more than three-quarters (76%) expect to boost sales between now and June 2014.

“There is a definite feel-good factor around English manufacturing at the moment and these latest figures reinforce positive reports from the Society of Motor Manufacturers and Traders, together with encouraging Purchasing Managers’ Index data,” says Steven Barr, head of MAS. “Investment is crucial if we are going to take advantage of reshoring and predicted growth in markets such as offshore wind, renewables and low-carbon vehicles.

“Importantly,” he continues, “6% of smaller businesses are looking to spend more than £500,000. This is a significant figure and proves that SMEs are prepared to invest ‘big’ in order to take advantage of opportunities presented by the upturn.

Barr: there's a definite feel-good factor

“The fact that more companies are applying for grants and the Regional Growth Fund means awareness of available support is rising and I’m encouraged that some firms are also using their own in-house funds (11%),” Barr adds. “This suggests manufacturers have been prudent through the recession and are trying to be more self-reliant when it comes to financing expansion.”

For the first time since 2012, more than half (53%) of English SME manufacturers are expecting to take on staff during the coming six months – a 14% rise on the previous MAS report.

“The employment data makes for very interesting reading,” Barr comments. “Despite previous Barometers showing optimism in sales, investment and new technology, the number of firms planning to recruit has remained fairly consistent at around 40% over the past year. This was understood to be because companies were retaining staff during the slowdown in the hope that volumes would return. With so many firms confident of growth, it could be that manufacturers are now looking to increase capability and capacity, or perhaps are looking to attract employees with different skills.

“The significant question now is do we have enough people to fill these positions or will it be a case of growing capability through apprenticeships and graduate recruitment?”

Commenting on the MAS findings, business and energy minister Michael Fallon, says that the figures “point towards signs of a renaissance in manufacturing. SMEs are increasing in confidence, and looking to both recruit and invest. We're committed to working closely with the manufacturing sector to provide a strong base for the recovery, and to create growth for the future.”